Chinese quaff wine, snap up chateaux

Updated: 2012-04-27 07:39

By Lu Chang (China Daily)

The vineyards of bordeaux and their sprawling residences are delighting the palates of wealthy buyers

For Shen Dongjun, the 22-hectare chateau in Bordeaux seemed a priceless investment and a natural addition to his new wine business, rather than being just an expensive holiday home.

The idyllic Laulan Ducos, a medieval-style chateau, with surrounding vineyards that produce wine was the latest addition to Shen's business empire comprising of more than 300 jewelry stores.

"I have been searching for the right vineyard for more than six years. This is exactly what I was looking for and the wine quality is outstanding," he says. "My aim is to bring these high-quality French wines to China at affordable prices."

Shen, 42, is part of a new wave of Chinese investors who are snapping up wine estates across the world to quench China's growing thirst for high-quality wines.

Data provided by the International Wine and Spirit Research shows that China surpassed Britain as the world's fifth-largest wine consumer last year, with annual consumption set to surpass 250 million cases (12 750-milliliter bottles a case) by 2016.

Apart from the wine trade, the French chateaux are also turning out to be perfect holiday homes for the well-heeled Chinese who have been adding luxury cars, designer clothes, high-end accessories and private yachts to their shopping baskets in the last few years.

Nowhere is the trend more evident than in the region surrounding the Garonne River in Bordeaux, France, where Chinese buyers and private and State-owned firms have bought nearly 15 to 20 chateaux in the last five years. There are estimated to be nearly 11,000 chateaux in the region.

Cici Dong, head of the Asia-Pacific desk at the London-based housing agent Savills, says during the recent three-day Beijing Luxury Properties Showcase her company managed to conclude three to five deals with Chinese investors for vineyard buys in the Bordeaux region.

"The number of transactions may seem small, but we have been receiving a lot of inquiries since last year," Dong says, adding that the real boom will happen in the next few years. "A huge demand is already there and it is has been growing steadily."

China is the largest importer of wine from Bordeaux and domestic consumption of the beverage is believed to have soared by nearly 110 percent last year. Dong says that most of the French vineyards that are up for sale have price tags ranging from 3 million euros to 20 million euros.

"For a successful entrepreneur, having his or her own vineyard is a symbol of status, achievement and good taste," she says. "For Chinese buyers, the Bordeaux region represents the best wine location. This is why they are keen to acquire property there rather than going to other wine-producing areas such as Italy and Spain despite better bargains."

Jenny Hu, the Chinese representative of CK Partners, a Paris-based agency that sells French vineyards, luxury properties, and golf resorts, says that unlike the multi-million-euro villas in Beijing, wine estates are sound investments for Chinese business people.

"The global financial crisis has created a life-time opportunity for investment in centuries-old castles that can be turned into luxury hotels and beautiful vineyards, and more importantly fine Bordeaux wines," she says.

The economic downturn has been a telling blow to the Bordeaux region with exports falling 23 percent to 3.37 billion euros in 2009. Bordeaux wine makers are believed to have lost about 100 million liters of output between 2008 and 2009, according to the Bordeaux Wine Council.

Though CK Partners is yet to finalize any chateaux deals with Chinese investors, the company is believed to be in advanced negotiations for several properties with some large media groups and high net worth individuals in China.

"Most of the Chinese investors tend to buy small chateaux, rather than go for top-notch wine producers," Hu says. "They are more interested in the impressive houses and the nice view."

Wine industry experts believe that buying up foreign vineyards is a smart move for many Chinese investors, as it offers them a chance to tap China's growing high-end market. But such purchases may also suffer if the acquirer lacks knowledge of wine production and management.

"Wine is not part of the traditional drinking culture in China, and as such many buyers, who haven't been in the wine industry, may find it hard to operate the wineries," says Duan Changqing, director of the grape and wine research center at the China Agricultural University. "But it is fine if they are just buying the properties for fun."

But for those with an eye on business, it also involves additional investment in trained people to keep the wineries running. To ensure the high quality of Bordeaux wines, Shen has retained most of the previous employees at the chateau.

"We have also not made any changes in the original wine making techniques as we respect the French wine culture."

Shen has recently made the Bordeaux wine available in the Chinese market, at prices ranging from 2,380 yuan ($377, 286 euros) to 2,580 yuan a bottle. He says unlike others, Chinese investors have an advantage as they can quickly build lucrative distribution networks in China with their connections.

Though there have been apprehensions among many winery owners in Europe that Chinese buyers may neglect the vineyards, they have been welcomed with open arms in Bordeaux.

"The Chinese investment will create a win-win situation for us as many chateaux are currently experiencing sluggish business and an ever-shrinking market," says Pierre Goguet, president of the Chamber of Commerce and Industry of Bordeaux, who plans to bring representatives of 90 enterprises from the region to China to meet prospective investors.

At the same time there is also a growing interest among Chinese drinkers for the new world wines from Australia and the US. Wine from these countries is cheaper than those from the old world countries like France and Italy.

Retired NBA basketball star Yao Ming recently set up his own winery, Yao Family Wines, to make wine from the cabernet sauvignon grapes harvested in 2009 from the Golden State Napa Valley, California.

Chinese investors are also believed to have bought six Hunter Valley wineries in Australia last year, with several more in the pipeline, local media reports say.

Andrew Margan, president of the Hunter Valley Vineyard Association, told ABC news recently that the association wants fresh investment from overseas, as the wine industry in Australia is "at the bottom of the cycle in terms of the glut".